Polices and laws regulating China guarantee industry

Polices and laws regulating <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" /> China guarantee industry <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Since China has established the Socialism Market Economy System in 1992, there came a favorable atmosphere for the growing of the SMEs and the birth of the credit guarantee industry.

In the following 10 years, the NPC, State Council and other departments enacted a series of policies and laws, which greatly helped the rapid development of the credit guarantee industry.

1.         The Guaranty Law of the People's Republic of China , approved by the 14 th Meeting of the Standing committee of the 8th National People's Congress on June 30, 1995

2.         Guidelines on Enhancing and Improving Financial Services for Small Enterprises , promulgated by the People’s Bank of China in 1999.

It definitely pointed out to establish the SMEs agent service system and set some special details, such as the SMEs loan evaluation, the reasonable guarantee amount for the guarantee companies and the simple procedure for SMEs guaranteed loan.

3.   Guidelines on Establishing the Experimental Unit of SMEs Credit Guarantee System promulgated by the State Economic and Trade Commission in 1999.

It pointed out the importance of establishing the SMEs credit guarantee system, and required the local governments to advance the system systematically and steadily. It also specified the objects which can be assisted by the guarantee industry.

4. Guidelines on Encouraging and Promoting the Development of SMEs , promulgated by the State Council.

It urged the local government to set up the credit guarantee system for the SMEs’ financing.

5. Provisional Rules Governing the Risk Management of SMEs Financing Guarantee Organization promulgated by the Ministry of Finance in 2001.

It made specific regulations about the operation measures of guarantee amount ratio, the deduction of the risk reservation capital, ect..

6. Guidelines on Strengthening the Credit Management of SMEs , promulgated by State Economic and Trade Commission with other 9 commissions

It pointed out the importance, the guiding lines and principles to strengthen the SMEs credit management, as well as a series of operation methods.

7. Guidelines on Enhancing the Lending Support for the Profitable and Credible SMEs , promulgated by the People’s Bank of China in 2002.

This is the third document of the People’s Bank of China concerning the loaning assisting to SMEs in four years.

8. The SMEs Promotion Law of the People's Republic of China , enacted by the XXVIII Session of the 9th Standing Committee of the National People's Congress in 2003.

It prescribed that local governments above the county level and related departments should promote and organize the construction of SMEs credit guarantee system. Until now, the construction of SMEs credit guarantee system has been gained attention from the legislative level. Hence, there came a rapid development period of China guarantee industry.

9. Opinions of Encouraging, Supporting and Guiding the Improvement of Individual and Private Economic , enacted by the State Council in 2005

It reaffirmed the necessity to improve the construction of guarantee system..

10. Guidelines on Banks’ Lending to Small Enterprises , promulgated by China Banking   Regulatory Commission in 2005.

It set new rules about the SMEs loan, guaranteed loan, risk control, risk evaluation and payment ways

11.     Guidelines on Strengthening the Credit Guarantee Construction System of SMEs , promulgated by the National Development and Reform, Finance Department, People’s Bank of China, Revenue Department and China Banking Regulatory Commission in 2006 .

There are four main points in this document:

①      establishing and optimizing the risk compensation system in the guarantee organizations;

②      perfecting the taxation favorable polices of the guarantee organizations;

③      improving the mutual-profit corporation between the guarantee organizations and financial institutions;

④      creating advantages for the guarantee organizations’ business practices;

⑤      strengthening the guilds and services to guarantee organizations

12.     Risking Prompts about the Corporations between the Banks and Guarantee Organizations , promulgated by China Banking Regulatory Commission .

It set the rules that the guarantee companies must have the registered capital no less than 0.1billion RMB, and must be paid-up capital.

13.     Financial Rules for the financial enterprises , promulgated by the Finance Department in 2007. This is the first time to put the guarantee companies under the regulation of the financial enterprises’ financial management.

14.   Provisional Rules Governing the SMEs Credit Guarantee will be enacted in 2007

According to this rules, it will have specific rules about the entry standard of the industry, the business scope, the qualification of the employment, the in and out requirements of the employment, and the assisting measures, ect.. This rule will give the guarantee industry more definite legal status as well as the normative management.